Verizon CEO confident about getting payments from Netflix, too

A day after Netflix agreed to pay Comcast for a direct connection to the Internet service provider's network, Verizon CEO Lowell McAdam said he is confident about striking a similar deal with the streaming video provider.

Asked by CNBC if he expects to make a deal with Netflix, McAdam said, "I would expect that we would. I'm not here to pre-announce and I'm not here to change my hand at the negotiating table, but I think there's a good opportunity here. Both [Netflix CEO] Reed [Hastings] and I have talked about it and we think it's in both of our interests.

Further Reading

Verizon wants to be paid by consumers and Cogent, but Cogent refuses to pay.

"It's not a surprise that Netflix has been talking to everybody, and we've been talking to them for about a year," he also said. McAdam said he doesn't know the exact details of the Netflix/Comcast deal, but he thinks it's a "good thing" for Netflix to pay for direct access to consumer ISP networks.

"In order to keep the Internet vibrant, we have to make the investments," McAdam said. "If you see someone come in with a lot of load on the Internet, the video, you've got to get that in an efficient place. Making the connections far out in the network is a good thing and frankly paying for it, the commercial model, I think will work pretty well. To me that shows that you don't necessarily need a lot of regulation in a dynamic market here. By doing these commercial deals, we'll get good investments and good returns for both parties."

Netflix had resisted paying ISPs, but it decided to make a deal with Comcast after streaming performance took a nosedive in recent months. Streaming performance on Verizon has been dropping too, and Verizon was accused of purposely not upgrading infrastructure necessary to make Netflix and other applications operate smoothly on its network.

Consumer advocacy group Public Knowledge said that Netflix's payments to Comcast set a dangerous precedent. "No one on the outside knows what is happening in this market," wrote Public Knowledge Senior Staff Attorney John Bergmayer. "However, it is clear that residential ISPs should be in the business of charging their users for access the Internet, not of charging the rest of the Internet for access to their users. This ensures that they are putting the needs of their users first."

UPDATE: AT&T is also negotiating with Netflix. "We’re in discussions with Netflix to establish a more direct connection between our networks, similar to agreements we have with others, so that AT&T broadband customers who use Netflix can enjoy an even better video experience," the company said in a statement.

The Federal Communications Commission hasn't regulated the peering and transit markets—its net neutrality rules did not cover the type of connection Netflix and Comcast agreed to. In any case, a court ruling overturning the net neutrality rules made it legal for companies like Verizon to block or degrade third-party Web applications.

McAdam was also asked about Google Fiber. He said he has told Google CEO Larry Page that the two companies should work together to make applications that can use gigabit bandwidth. Heavy video and 3D medical imaging should benefit from fiber networks, McAdam said.

Verizon's fiber buildouts have notably stalled. McAdam didn't say anything about expanding FiOS to new areas, but he said Verizon could easily upgrade bandwidth to a gigabit.

"What I'm hopeful of is that [Page will] come up with some applications that really show the need for fiber," McAdam said. "We see great uptake of our broadband now, we're seeing 300 and 500 speeds [in Mbps], we can go up to a gigabit easily if we needed to. The question is, 'is the consumer demand there'? I'm very happy they're making those investments because it helps us prove the overall case for fiber."